Today the government resolved to support the suggestion of Nomura International plc, the consultant for selling, and to suspend selling Citadele bank. This matter will be tabled again when the situation in international financial markets improves. Nomura is of the opinion that discontinuing the sales process is the best decision presently otherwise the State will not be able to get the best price for this transaction.
Nomura recommends restarting working at selling the bank when stability is recovered in the market and investors are ready to make long-term investments.
“Presently investors are not ready to make long-term investments into the banking sector due to the financial situation in Europe. Even though Citadele bank’s sales process was launched successfully, the negative backdrop proved to be too influential. Several investors stated that they would be ready to re-launch the bank’s sales transaction as the situation becomes more stable,” points out Nomura.
“The Latvian government resolution on postponing selling of Citadele bank’s shares owned by the Latvian State and returning back to this matter when more advantageous conditions appear in the market is a logical step and it is in line with the interests of the society and State. Until further decisions are adopted by shareholders, Citadele will remain to be in the hands of the existing ones, i.e. Latvian government and the EBRD. It will continue developing steadily just like previously,” says Juris Jākobsons, Chairman of Citadele bank’s Board.
“Selling Citadele’s shares at the highest price possible is in the interests of the society and State. Simultaneously, it is important for the bank, its clients and the society for Citadele to acquire a stable investor who is ready to make long-term investments in the bank’s development. Therefore the government's decision to return to the matter on attracting an investor, when market conditions in Europe are more advantageous for selling the bank’s shares, is reasonable," explains J. Jākobsons.
Mr. Jākobsons pointed out that suspending the process of selling Citadele’s shares will not influence the bank’s activity – Citadele will carry on working and developing, it will continue providing services to retail customers, enterprises and institutions, and it will also carry on working in asset management sector, focusing mainly on the Baltic market. Citadele will also carry one repaying the support deposited by the Latvian State.
75% (minus one share) of Citadele Bank shares are owned by Latvian State via the state owned Privatization Agency and the European Bank for Reconstruction and Development possesses 25% plus one of its shares.
As announced, Citadele Bank returned to profits faster than had been anticipated in the restructuring plan this year – already in the first half of 2011. Third-quarter results show that profits rose from LVL 182,000 to LVL 3.4 million. In comparison to 2010, Citadele has substantially increased net interest revenues. The bank’s liquidity ratio is a healthy 62.8%, which is twice more than requested 30% by the regulator.
Since August 2010 Citadele bank has succeeded four times at partially repaying to the State the aid received by the government of Latvia in the shape of a term deposit. The amount of the aid paid back is 157.1 million Euros or 110.4 Lats. During the period from August 2010 to the December 2011, Citadele has paid the State a total of EUR 23.9 million (LVL 16.8 million) in interest for the received aid, which includes State term deposits and the subordinated loan.
The outstanding amount of State deposits that Citadele has to repay (not counting interest) is EUR 46.6 million (LVL 32.8 million). Citadele Bank will repay that money next year.
The bank’s total assets as of September 30, 2011, amounted to LVL 1.2 billion (LVL 1.4 billion for the group). The amount of outstanding loans was LVL 621 million and LVL 713 million respectively for the bank and the group, while the indicators in terms of capital and reserves were LVL 85.3 million and LVL 83.0 million respectively. Total deposits at the bank at the end of Q3 amounted to LVL 980 million (LVL 1.2 billion for the group). Citadele’s capital adequacy ratio has increased in 2011. It is also higher than is predicted in the bank’s restructuring plan. Citadele bank’s vision is to become the most valuable local financial group in the Baltic States.
Citadele Bank is a universal bank in terms of the range of services offered. Main types of its services are the following: servicing of current accounts; payment cards; consumer loans and mortgage loans; term deposits for retail customers and enterprises; distribution of American Express credit cards in Latvia and Lithuania; development of 2nd and 3rd level pension savings; provision of loans and refinancing services to enterprises; guarantees and letters of credit; leasing and factoring; 3rd level closed pension funds for enterprises; life insurance; private banking services and Concierge service; investment of funds in more than 20’000 local and foreign investment funds.
Information on suspension of the sales process of Citadele bank from State Joint Stock Company “Privatization Agency”
Today, on 27 December, the government resolved to assess the opportunities of selling the bank in October 2012 when Privatization Agency and Nomura will have prepared an evaluation of the current situation in the market and re-launching of the sales process. Amendments to the bank’s sales strategy, which were previously approved by the government, will be introduced accordingly. If the government adopts a positive resolution on re-launching the sales process of the bank in October, both – the investors who have expressed their interest as well as other potential investors will be invited to submit their proposals. Resolution on suspending selling of Citadele bank will have no impact on the bank's activity; it will continue working on the implementation of the restructuring plan. The restructuring plan provides that the State must return the bank back to the private sector in the long run. However, the restructuring plan does not provide for compulsory selling of the bank since the State must recover the maximum amount possible of the invested funds.
Sales process of the bank was launched in July this year. Nomura International, sales consultant, reached out to more than 100 applicants, and their initial proposals were received in October.